U.S. Investment in ‘Human Capital’ Plunges While China’s Rises

The extent to which the U.S. strengthens Americans’ ability to contribute to the economy — through investments in health care and education — has dropped significantly in recent decades while comparable rankings in China have increased, according to a new report.

Expenditures in schools, training, skills and the overall health of the population has shifted dramatically in some corners of the world between 1990 and 2016, says a study published Monday in The Lancet and based on data gathered by the Institute for Health Metrics and Evaluation at the University of Washington. It seeks to better understand “human capital,” a measure that includes how much education a person receives and how many years of their life they can effectively contribute to working.

Among the world’s biggest economies during that time, the U.S. fell from sixth place to 27th in investing in human capital while China rose from 69th to 44th. Other economic powerhouses including Japan, Germany, the U.K. and France all stayed within four spots of their original rank.

Top Investors in Human Capital (2016)

Rank Country
1 Finland
2 Iceland
3 Denmark
4 Netherlands
5 Taiwan
6 South Korea
7 Norway
8 Luxembourg
9 France
10 Belgium

(Source: The University of Washington’s Institute for Health Metrics and Evaluation)

Investment in these fields is directly tied to a country’s ability to grow its economy, the study finds. A lack of advances in education is the main cause of America’s lagging position, according to the study’s authors.

“Human capital can be understood as the educational attainment, learning, and health status of the workforce that contribute to economic productivity,” according to a statement accompanying the study. “Put another way, it is workers’ collective skills, knowledge, and other intangible assets that are needed for productive work.”

News reports in recent years have documented the U.S. government’s flagging investments in education, which dropped 3 percent for elementary and high schools between 2010 and 2014, while other global economic powerhouses increased education spending by 5 percent on average.

Countries in Northern Europe topped the 2016 list, including Finland, Iceland, Denmark and the Netherlands, which were also in the top 10 in 1990. Taiwan earned the fifth position in the 2016 data, up from 10th in 1990. South Korea, Norway, Luxembourg, France and Belgium round out the top 10 for the latest data.

Human Capital Rank for the 10 Most Populous Countries

Population Rank Country 1990 2016
1 China 69 44
2 India 162 158
3 U.S. 6 27
4 Indonesia 130 131
5 Brazil 91 71
6 Pakistan 166 164
7 Nigeria 155 171
8 Bangladesh 170 161
9 Russia 51 49
10 Mexico 87 104

(Source: The University of Washington’s Institute for Health Metrics and Evaluation)

The worst performing countries are, in order, Niger, South Sudan, Chad, Burkina Faso, Mali, Somalia, Cote d’Ivoire, Afghanistan, the Central African Republic and Mozambique.

The study comes at a time of increased international attention on countries’ investments in human capital. The World Bank in August unveiled its Human Capital Project, designed to draw attention to underperforming parts of the world and better comprehend how human capital affects world economies.

“Neglecting investments in human capital can dramatically weaken a country’s competitiveness in a rapidly changing world, one in which economies need ever-increasing amounts of talent to sustain growth,” World Bank President Jim Yong Kim wrote in a June Foreign Affairs op-ed, citing the limited data that existed at the time to further analyze the issue — something the authors of the study released this week hope to amend.

[MORE: 10 countries with the most well-developed public health care systems.]

“The new measurements will encourage countries to invest in human capital with a fierce sense of urgency. That will help prepare everyone to compete and thrive in the economy of the future — whatever that may turn out to be,” Kim said during the project’s release. “And it will help make the global system work for everyone.”

Countries that invest more in human capital also showed faster growth in their gross domestic products, according to the study. Countries in the top quarter of improving performance in human capital saw a median 1.1 percent yearly growth in their GDP higher than countries in the bottom quarter.

Human Capital Rank for the 10 Largest Economies

Economy Rank Country 1990 2016
1 USA 6 27
2 China 69 44
3 Japan 12 14
4 Germany 21 24
5 U.K. 27 31
6 France 7 9
7 India 162 158
8 Italy 25 35
9 Brazil 91 71
10 Canada 4 11

(Source: The University of Washington’s Institute for Health Metrics and Evaluation)

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